Each year since 1927 Time Magazine has selected a Person of the Year as part of a special year-end issue.
The magazine selects a candidate based on that person's influence on history. Persons of the Year have included Mahatma Gandhi (1930), Winston Churchill (1940), the American Soldier (2003) and Barack Obama (2008). The magazine has been criticized for selecting Adolf Hitler (1938), Joseph Stalin (1939) and the Ayatollah Khomeini (1979) as nominees.
In the South African context, and based on the above criteria possible candidates could include: Nelson Mandela, Julias Malema, President Zuma, Eugene Terreblanche, Mark Shuttleworth and many others.
However, an unsung hero of the South African economy is the Tax Practitioner.
The Role of Tax Practitioners
According to a recent report issued by the OECD, tax advisors play a vital role in all tax systems, helping taxpayers to understand and comply with their tax obligations in an increasingly complex world.
In their research paper "The role of tax practitioners in tax reporting" Beck et al compare the reported tax liability of two groups of tax payers - those that use the services of tax practitioners and those that do not. Their conclusions might be surprising to some!
The involvement of a tax practitioner does not lower the reported tax liability in a tax payer's tax return. This finding refutes any allegation that tax practitioners, in general, are somehow complicit in unlawful tax evasion.
However, the real benefit in using a tax practitioner is evident from another reported conclusion. On a post-audit basis the average tax and penalty payments are lower among taxpayers who hire tax practitioners than for those that do not hire a tax practitioner. Tax practitioners therefore improve the accuracy of the tax return. Tax practitioners ensure that the reported tax liability will be accurate and penalties will be avoided.
Tax Registered vs. Taxpayer
With the launching of the 2012 tax season it was reported that the tax base had grown from 6 million in 2010 to 13.7 million in 2012. R251.6 billion or 33.8 % of total revenue collection for 2010/2011 was collected from individual taxpayers. The rest came from corporates (19.7%), VAT (27%) and a range of other taxes (19.6%). However, individuals ultimately "pay" the majority of all taxes - as consumers or as corporate shareholders.
Although the number of registered taxpayers has substantially increased, research performed by Paul Joubert, Senior Researcher at the Solidarity Research Institute, concluded that only 1,9 million of all registered individual taxpayers are responsible for 92% of all income tax collected in 2010/11.
If only 1.9 million individuals pay these vast amounts of taxes then the last thing they can afford is to pay more than their fair share or pay penalties for incorrect or late tax returns.
Tax practitioners should therefore be seen as a resource of national importance. Tax laws are complex and tax deadlines are a dime a dozen. Completing complex tax returns, ensuring compliance and the avoidance of penalties (which totaled R1,7 billion for 2010/2011) takes care and skill. South Africa should protect its scarce resource.
A Code of Conduct for All Tax Practitioners
However not all tax practitioners are subject to the same code of conduct or professional body oversight. SAIT is the only professional body whose members are required to annually submit tax clearance certificates to maintain membership.
Currently more than 50% of tax practitioners are not members of a professional body and are not subject to the same rules of compliance. Taxpayers have little recourse if they use non-professionals.
It is interesting to note that SARS offices are also assisting taxpayers with completing their tax returns. Urban legends abound of taxpayers having to pay thousands of additional taxes because they were assisted by unqualified or non-professional SARS staff in completing tax returns.
Whether accurate or not, South Africa should ensure that all tax practitioners employed with SARS or in private practice, should be members of a professional body. Even our legal fraternity requires that state prosecutors should be subject to independent regulation. Being employed by the state does not absolve a legal practitioner from independent regulation and a professional code of conduct.
Tax practitioners perform an important function and ensure that the complex tax system operates with the minimum of compliance costs. Their role and function should be improved by levelling the playing field and ensuring performance standards that apply to state employees and private practitioners alike.
Once standardised rules apply to all within the tax practitioner community, we will be able to claim the title "Person of the Year".
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.